Is an LLC a One Time Fee or Annual Cost?

Key Takeaways

• Forming an LLC involves both one-time and recurring costs.
• The one-time fee is the filing fee for your Articles of Organization.
• Recurring fees may include annual or biennial reports, franchise taxes, and registered agent fees.
• Costs vary significantly by state — some states charge as little as $50, while others exceed $800.
• Ongoing compliance costs (like maintaining licenses or registered agents) keep your LLC in good standing.
• Failing to pay annual or franchise fees can result in penalties or administrative dissolution.
• Even “low-cost” states can have additional hidden costs for business licensing, publication, or reinstatement.

LLC Formation Costs

When you form an LLC, expect to pay fees for the following:

• State filing: You must file Articles of Organization with your Secretary of State office. Each state has its own filing fees, so your cost is determined by the state in which you file. Normally, LLC filing fees range from $50 - $800.
• Business name registration: You'll reserve an LLC name with your Secretary of State. Most states conduct a business name search to see if the name is already in use. Your registration won't be accepted if your LLC name is already registered by another business. You'll then have to refile for another name and pay another filing fee, so it's best to check the availability of an LLC name before you submit your filing.
• Services: Along with filing fees, you might opt to pay for services from a legal professional to help form your business. It can cost anywhere from $490 to $790 to have a business lawyer do the work for you, depending on the number of owners your LLC has as well as its complexity.

Understanding What the One-Time LLC Fee Covers

When considering is an LLC a one time fee, it’s important to understand what that one-time cost actually includes. The state filing fee you pay when submitting your Articles of Organization officially creates your LLC and grants it legal standing. This payment typically covers administrative processing, database entry, and issuance of a certificate of organization.

However, this fee does not include optional or additional expenses such as:

• Registered agent service: If you hire a professional agent, expect to pay around $100–$300 per year.
• Name reservation: Some states charge $10–$25 to reserve a business name before formation.
• Expedited filing: States like Texas and California offer faster processing for an extra fee, often $25–$100.

In short, while the filing fee is a one-time charge, forming an LLC can include supplementary expenses depending on how you structure and register your business.

Ongoing Costs

There are also some ongoing fees you'll have to pay to keep your LLC up and running. You have less paperwork compared to a corporation, but you must still pay annual filing fees to the state. These fees can be high, depending on your jurisdiction. Your state can change the fees any time, and some increase fees in order to raise more money.

Common ongoing costs include the following:

• Franchise tax: Your business profits won't be taxed directly in most cases, but some states impose a yearly flat tax on all LLCs. It ranges from a relatively low $250 in Delaware to the pricier $800 (minimum) in California.
• Reporting fees: Most states require you to pay annual fees, or reporting fees, in order to keep your LLC running. In a state like New York, fees increase based on the number of partners your LLC has, and range from $325 to a max of $10,000. The reporting fee in other states can be much lower, with some being as low as $20. Reporting fees are on top of franchise taxes.
• Time and effort: While the amount of time and attention you'll put into your business can't be calculated in monetary terms, this isn't at all a negligible amount.

If you fail to stay compliant with your state's LLC requirements, you may find that you don't have the asset protection you need when it's most important.

How Much Should You Budget Annually for an LLC?

Beyond the initial registration, most LLCs have recurring obligations that ensure continued recognition by the state. These vary by location and industry but generally include:

• Annual or biennial report fees: Required in most states to confirm business details and ownership. Costs range from $0 (in states like Ohio) to $500 or more (in Massachusetts).
• Franchise or privilege taxes: Charged by some states even if your LLC earns no income. For instance, California imposes a minimum $800 franchise tax, while Delaware’s annual franchise tax starts at $300.
• Registered agent renewal: If you use a service, renewals usually run $100–$300 yearly.
• Business license renewals: Depending on your city or county, licenses may require renewal fees each year.

Budgeting for at least $100–$1,000 annually is realistic for most LLCs. These expenses are the primary reason an LLC is not a one-time fee.

LLC Fees by State

The filing fee to register your LLC is a one-time fee, while the annual fee is ongoing and paid to keep your business in compliance and good standing with the state. You typically pay an annual fee every one or two years, and it's a requirement, regardless of your business's activity or income. Whether you pay every year or every two years depends on your state.

If you fail to pay your annual fee, most states can shut down, or dissolve, your business. The average annual fee is $101.

While most states call their yearly report an “annual report,” it may be known by other terms, such as the following:

• Annual registration fee
• Annual certificate
• Periodic report
• Franchise tax report
• Biennial statement
• Business privilege tax return

While it may seem like a good idea to form your LLC in a state that has lower fees, this isn't always the best way to go about it. In the long run, it could actually cost you more money. You might end up doing business in your state illegally and then having to register two LLCs — one domestic, for your home state, and one foreign, for the outside state.

It's very important to stay current with your business's fees to avoid costly penalties and the possibility of having your business dissolved. You might consider having one person in your business (or your registered agent) keep track of a fee schedule so your LLC remains compliant.

What States Have the Highest and Lowest LLC Fees?

LLC filing and maintenance fees can vary dramatically depending on your state. For example:

• Highest Initial Filing Fees:
  • Massachusetts: $500
  • Tennessee: $300 (minimum, based on members)
  • Texas: $300
• Lowest Initial Filing Fees:
  • Kentucky and Arkansas: $40
  • Arizona: $50
  • Mississippi: $50

Beyond the one-time fee, states also differ in their annual or biennial LLC maintenance costs:

• High Annual Fees:
  • California: $800 minimum annual franchise tax
  • New York: $325–$10,000 (based on income)
  • Massachusetts: $500 annual report
• Low or No Annual Fees:
  • Arizona and Ohio: No annual reporting requirement
  • Indiana: $30 biennial report
  • Minnesota: No annual fee for domestic LLCs

Choosing a state based solely on low fees can backfire if you live elsewhere and must register as a foreign LLC — incurring fees in both states.

Are There Hidden or Optional LLC Costs?

In addition to required filing and maintenance fees, you might encounter other costs when forming or operating an LLC:

• Registered Agent Fees: If you hire a third-party agent, this may cost $100–$300/year.
• Operating Agreement Drafting: While not required by all states, having one prepared by an attorney may cost $200–$1,000.
• Publication Fees: Required in some states (e.g., New York), publication costs can range from $40 to over $1,000 depending on the county.
• Certified Copies and Certificates of Good Standing: These optional documents may be needed for banking or foreign registration and often cost $10–$50.
• Business Licenses: Depending on your city and industry, you may need to apply for a business license with separate fees.

These costs are not “one-time” and should be factored into your ongoing budget for compliance and operations.

Additional Compliance and Administrative Expenses

Beyond the predictable annual costs, some LLC owners face extra expenses tied to compliance and documentation:

• Certificate of Good Standing: Often $10–$50 when needed for loans or expansion into another state.
• Foreign qualification fees: If your LLC operates in multiple states, each requires separate registration — and its own fees.
• Reinstatement fees: If your LLC lapses for nonpayment, reinstating it can cost $100–$500 plus back fees.
• Publication fees: New York and Arizona require newly formed LLCs to publish formation notices in local newspapers, which can exceed $1,000 depending on the county.

These costs are not mandatory everywhere, but they underscore why forming and maintaining an LLC involves more than a single payment.

Is LLC a One Time Fee or Recurring?

Forming an LLC requires a one-time state filing fee to establish your business, but it is not the only cost you’ll face. To keep your LLC in good standing, you must pay recurring fees, typically on an annual or biennial basis. These include:

• Annual Report Fees
• Franchise Taxes
• Renewal of Business Licenses

Some states combine these into a single report, while others charge separately. If you fail to pay these fees, your LLC can be suspended or administratively dissolved by the state.

So while the filing fee is a one-time cost, an LLC is not a one-time fee overall — ongoing costs are necessary for legal operation.

The True Cost of LLC Ownership Over Time

While forming an LLC begins with a one-time payment, maintaining one is a continuous financial responsibility. States often treat annual reports and franchise taxes as the price of remaining in good standing. Business owners should view these as part of routine operating expenses, not optional add-ons.

In addition to state-level costs, you may incur:

• Local business permit renewals
• Professional licensing fees
• Accounting or tax filing assistance

Understanding both the upfront and recurring costs helps entrepreneurs plan for the long-term financial health of their business. To ensure you’re compliant with your state’s requirements and deadlines, consider consulting a qualified business attorney — you can find one through UpCounsel to help manage filings and compliance efficiently.

Frequently Asked Questions

1. Is an LLC a one time fee or a yearly payment?
   An LLC requires both — a one-time filing fee for formation and ongoing annual or biennial fees to stay compliant.
2. What happens if I don’t pay annual LLC fees?
   Your LLC can be suspended, lose good standing, or be administratively dissolved, meaning it legally ceases to exist.
3. Which states have no annual LLC fees?
   Arizona and Ohio don’t charge annual reporting fees, though you may still owe local taxes or licensing costs.
4. How much does it cost to form an LLC initially?
   Filing fees range from about $40 to $500 depending on the state. Optional services like registered agents or name reservations add to the total.
5. Are LLC fees tax deductible?
   Yes. LLC formation and maintenance fees are generally considered ordinary and necessary business expenses, making them deductible on your federal tax return.

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